The sovereign debt market is still unable to appreciate the fact that President Rafael Correa's decision to formally default on its foreign obligations on Monday is rooted in ideology, not in any shortage of funds. The ideological premise, that Ecuador's borrowings from international lenders are tainted by corruption and are thus "immoral", is certain to gather momentum in 2009.

This type of risk is very difficult to measure. Back to Rakesh:

Those diminishing the impact of Ecuador's default (on $3.9 billion of global bonds) may be failing to grasp the fact that both, a significant component of the sovereign debt matrix and South American equities, are now subject to political risks which are extremely difficult to quantify.

And default has been a common outcome for Ecuador (chart via data from 'Serial Default and the “Paradox” of Rich-to-Poor Capital Flows (2004), C. Reinhart and K. Rogoff' via Infectious Greed: